Central China Securities Co.,Ltd. (Central China Securities Co.,Ltd.) has released a research report stating that the securities industry's revenue grew 31.38% year-on-year in the first half of 2026, while net profit rose 23.50% year-on-year, with all business segments achieving comprehensive growth. The firm expects the average P/B of the brokerage sector to fluctuate within a core range of 1.10x to 1.30x in the fourth quarter, and if valuations move toward the lower end of that range, it would still present a good opportunity to re-enter the brokerage sector, warranting continued close attention to policy developments, market conditions, and the brokerage sector.
The main views of Central China Securities Co.,Ltd. are as follows: The securities industry delivered its best half-year operating results in nearly a decade in the first half of 2026. Industry revenue grew 31.38% year-on-year, and net profit rose 23.50% year-on-year. Industry leverage continued to rise, ROE further recovered, and brokerage, margin financing, and broad investment activities contributed the core incremental performance. The proportion of proprietary trading revenue remained stable, while the share of brokerage revenue rebounded to its second-highest level in nearly a decade. Operating results among listed brokerages remained notably divergent, and industry profitability concentration hit a record high.
All business segments of the securities industry achieved comprehensive growth in the first half of 2026. First, the equity market saw a strong structural rally driven by technology innovation, while the fixed-income market returned to volatile gains. The scale of financial investments held by listed brokerages continued to grow, with FVTPL assets expanding rapidly. The performance contribution from bond OCI declined, while that from equity OCI remained stable. The performance contribution from alternative investment subsidiaries increased significantly, and investment income (including fair value changes) continued to surge. Second, with a clear technology innovation theme and continuously rising market risk appetite, the average daily stock trading volume across the market expanded further, with notable increases in agency trading, seat fees, and agency sales. The market trading structure shifted toward institutionalization, and brokerage business activity continued to rise. Third, equity financing scale (excluding refinancing by listed banks) continued to recover, debt financing scale continued to expand, and Hong Kong IPO scale increased significantly. Investment banking business posted a moderate recovery for the second consecutive year, with the concentration effect of leading brokerages on investment banking business continuing to strengthen. Fourth, the recovery in asset management scale widened, and public fund scale maintained its growth trend. The performance contribution from listed brokerages' equity-participating and controlled public fund companies slightly and passively declined. Excluding fund management business, the net revenue from listed brokerages' asset management business stabilized and rebounded. Fifth, both the market-wide margin financing balance and the daily average margin financing balance significantly hit new historical highs. Margin financing interest income for listed brokerages continued to recover, while stock pledge interest income continued its downward trend. With the positive interest spread effect strengthening, the growth in net interest income expanded notably.
Investment recommendation — Policy front: On July 30, 2026, the Central Politburo meeting stated it would "deepen the comprehensive reform of capital market investment and financing, and enhance the resilience and confidence of the capital market." Since the third quarter, the capital market has experienced notable fluctuations due to external transmission factors. The tone set by this Politburo meeting released a clear signal of policy support, aimed at stabilizing market expectations and laying a solid policy foundation for the steady advancement of the capital market and the sound operation of its investment and financing functions. Fundamentals: Given the relatively solid performance base in the first half, even if the equity market experiences some volatility in the third quarter, it is highly likely that the industry's full-year operating results will remain stable with slight growth and reach a new high since 2016. Valuation: Since the third quarter, the brokerage index rebounded to a cyclical high in early July before gradually declining through fluctuations, and has recently approached the year-to-date low set in early June. The average P/B of the brokerage sector fell from 1.36x back to around 1.20x, remaining consistently below the sector's average P/B of 1.52x since 2016. In the fourth quarter, the year-on-year and quarter-on-quarter pressure on listed brokerages' operating results will ease markedly, and the room for the brokerage sector to continue weakening is relatively limited. The average P/B of the brokerage sector is expected to fluctuate within a core range of 1.10x to 1.30x in the fourth quarter. If valuations move toward the lower end of that range, it would still present a good opportunity to re-enter the brokerage sector, warranting continued close attention to policy developments, market conditions, and the brokerage sector. Recommendations include focusing on leading listed brokerages, small and medium-sized listed brokerages gradually developing differentiated competitive advantages, listed brokerages with strong technology innovation attributes, and listed brokerages whose valuations are significantly below the sector average.
Risk warnings: 1. Weakening equity and fixed-income market conditions leading to a decline in the securities industry's fundamentals; 2. Short-term stock price volatility risk for listed brokerages; 3. Policy effects from a new round of deepening capital market reform falling short of expectations; 4. Unexpected events causing a significant deviation between the 2026 securities industry's earnings expectations and actual operating results.
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